Kanebo battles to save tattered brand image

Cosmetics giant must act quickly to quell skin cream outcry: PR gurus



Kanebo Cosmetics Inc. will have a tough time repairing its image with consumer confidence at “rock bottom” after its skin-whitening products left ugly blotches on the faces of thousands of customers, analysts say.

The nation’s second-largest cosmetics firm — more than a century old but with its reputation for quality now in tatters — has room to recover but has to move swiftly and surely, according to experts.

Kanebo’s travails are the latest in a long line of public relations blunders that have felled companies of all sizes at home and abroad.

Among the casualties have been Toyota Motor Corp., which was forced to recall millions of cars in recent years over safety issues, Boeing Co., tripped up by the troubled debut of the 787 Dreamliner, and Chinese dairy businesses involved in the tainted milk scandal that left six children dead and sickened more than 300,000, scarring the entire industry.

The key to surviving brand-damaging incidents is to make a quick, transparent and genuine response, public relations experts say.

“Don’t simply broadcast information like many Japanese companies do, but promote two-way communication with all stakeholder groups,” including customers, said Daniel Fath, vice president of Tokyo-based Total Communications System. “Handled properly, a traumatic crisis becomes a valuable learning experience that ultimately strengthens a company’s relationships with its stakeholders.”

In an effort to put a stop to Kanebo’s spiralling public relations disaster, President Masumi Natsusaka went before the cameras last week to apologize to customers. They included nearly 10,000 people left with uneven pigmentation after using the firm’s skin-whitening creams, which are popular among women across Asia seeking lighter skin tones.

The embattled president pledged to overhaul safety controls at Kanebo while temporarily cutting his salary and that of other senior executives.

But his bid to defuse the situation came as a team of external experts appointed by Kanebo said it had been late in issuing the recall. The company’s decision to pull its products off the shelves came months after officials first received warnings from doctors who suspected a link between patients reporting skin blotches and Kanebo’s products.

Kanebo, whose brands include the Blanchir Superior and Sensai lines, failed to act early and was “obsessed with the idea that the skin discolouration was a disease” rather than a side effect of its products, said Hideki Nakagome, a lawyer who is heading the investigation.

Kanebo’s image “has nose-dived to rock bottom,” said Yasuko Kono, secretary general of Consumers Japan.

Underscoring the challenges that lie ahead, Mikako Ando, 51, said she was relieved at her own brand choices. “I feel lucky that I don’t use Kanebo’s products,” she said as she strolled through Tokyo’s fashionable Ginza district.

Communicating through social media tools, such as Twitter and Facebook, is another important way to get a company’s message out as it navigates a crisis, said Rachel Catanach, senior partner and managing director of the Hong Kong unit of public relations group FleishmanHillard.

A poorly handled product recall can have a “significant long-term impact” on a brand, she said, adding, “Too often, companies wait until they have full information, which is too late in a world of citizen journalists who can release their photo or tell their story via Twitter or other social channels within seconds of it happening.

“Every minute that goes by without an effective crisis response exponentially increases the risk to a company’s reputation.”

Toyota, the world’s biggest carmaker, “learned reputational lessons the hard way,” Catanach said, after taking a huge hit from the massive vehicle safety recalls. “Toyota went to great lengths to rebuild its reputation. Because of this, the Toyota brand has not sustained damage over the longer term.”

Kanebo, which markets its products in more than 50 countries, has seen retail sales plunge about 20 percent since the July recall. Millions of affected products were removed from store shelves in Japan, Britain and 10 Asian markets, including South Korea, Hong Kong, Thailand, Singapore, Indonesia and Taiwan.

Kanebo’s parent company, household goods giant Kao Corp., whose share price dived amid the scandal, said it would book a loss of about ¥5.6 billion in view of compensation costs.

Toshiyuki Kanayama, senior market analyst for Monex Securities, called on Kao to get more involved in Kanebo’s day-to-day operations to avoid a recurrence.

“Brand image is important for any business, but it’s all the more important in the cosmetics industry,” he said.